The Most Important Election Since 1932?

Why an Obama victory is critical

Jeff Madrick August 2, 2012 - 12:29pm

You don’t have to be a Republican to consider Barack Obama a less-than-ideal president. Indeed, disappointment with the president is rife among progressives. Taking office after the worst economic debacle of modern times, Obama faced enormous challenges and a great opportunity: as the Great Depression of the 1930s proved a catalyst for massive change, so too could the Great Recession have been a catalyst for significant change. Yet many who voted for Obama believe that he has aimed too low, effecting far more modest changes than the nation needed.

In domestic matters, he chose to fight the wrong war. The true enemy was weak wages and a lack of jobs, yet he essentially accepted the economic analyses laid out by conservatives, fixing his attention on the federal budget deficit and running what was basically an austerity administration. Yes, the $800 billion stimulus adopted at the outset was a significant achievement, and helped avert what could have been an outright depression. But the subsequent economic recovery has been weak. Today we still have high unemployment and a high proportion of people in poverty, and many who have lost their jobs have also lost their health insurance.

Yet instead of focusing on this pain, Obama supported a budget-balancing commission run by a conservative Democrat, Erskine Bowles [updated*], and a very conservative Republican, Alan Simpson. The Simpson-Bowles plan[1] called for significant restraints on government size, a dangerous reform of Medicare, Social Security reductions, and so on. Obama’s willingness to embrace this program has led some to wonder whether he is a Democrat at all—or whether, instead, he truly believes that a constrained government and a significantly shrunken safety net are American priorities.

Politically, the president’s actions have conveyed a strange fecklessness. He could have fought against conventional misunderstandings of the economic problem, but he did not. He almost never trumpeted the success of his stimulus program and was unable to create—or, I suspect, even to imagine—the political environment that might support a badly needed second stimulus. He could have pursued a far more aggressive program of mortgage relief, using the people’s anger at the big bankers to fuel popular support. But he did not. Similarly, while he supported financial regulation, he did so only tepidly; indeed, as Americans came to distrust bankers broadly, it seemed that Obama was more interested in assuaging that anger than in using it to confront Wall Street recklessness.

Meanwhile, as the linchpin of his domestic social policy, Obama proposed a significant revamping of the nation’s health-care system, mandating that all individuals must buy insurance—then sat out the congressional debate over the details. He almost never told the American people what the Affordable Care Act was all about[2].

In fact, the new law has many beneficial attributes, stipulating that insurance companies accept all applicants regardless of pre-existing conditions; that all employers of a certain size provide insurance for their workers; that states set up health-insurance exchanges to assist people in buying policies; that subsidies be provided for lower-income Americans; that children up to twenty-six be allowed to stay on their parents’ plans; and that the doughnut hole for seniors’ drug reimbursements gradually be closed. There is also a provision requiring insurance companies to use 85 percent of their premiums on medical care (they now use roughly 70 percent). But Americans don’t know much about these useful provisions. Why not? Maybe because Obama did not talk about them. And his failure to provide the necessary push helped allow Congress to drop the bill’s major cost-control proposal, a publicly run alternative to private health insurance known as the public option.

Having said all this, and despite my disappointments, I nonetheless consider it critically important that Obama win reelection in November, because the alternative is far, far worse. A Mitt Romney win would signal a political pivot even sharper than that effected by Ronald Reagan. It would be a turn toward less government and an even more minimal safety net—a radical attempt to return us to a pre–New Deal America, one run according to the crueler and more primitive forms of individualism. Indeed, this November may well be the most important election since Franklin D. Roosevelt’s victory over the Hooverite government minimalists. The election is crucial to the future of this country in many respects. I’d like to focus on six key areas:

1) Deficit alarmism and austerity economics. To some degree we have followed the same policies that have ravaged Europe, and have done so with President Obama’s acquiescence. But things will get far worse without him. On January 1, 2013, the Bush tax cuts will expire, as will extended unemployment benefits and the Obama payroll tax cuts, and Congress will be required to cut the budget dramatically because the supercommittee failed to do so. Though the American version of austerity isn’t as bad as Europe’s, our economy will be too weak to withstand higher taxes and government cutbacks. A second Obama administration would work to maintain government spending and probably the payroll tax cuts. If Obama is not president, harsh government spending cuts will be likely, even as tax cuts for the well-off remain in place and the military budget stays intact. The consequences are predictable. Recession is a high likelihood if Obama loses. And that could well bring on another credit crisis, as debtors fail to pay back what they owe.

2) Taxes. Higher taxes are the only way to pay for what the nation badly needs, and yet the Republicans blindly follow a path of reckless tax-cut advocacy. If Obama loses, we will get no tax increases on the wealthy. In fact, Mitt Romney, as of this writing, would cut rates sharply for upper-income Americans—even though the George W. Bush tax cuts, a boon for the wealthy, resulted in the slowest rates of GDP and job growth during a recovery and expansion of the post–World War II period. Romney tax cuts will be disguised as tax reform and simplification, but in reality they will represent little more than a boondoggle for the wealthy[3] at the expense of the nation’s economic health.

3) Social Security and Medicare. Under a Romney administration the nation’s key social programs will fall into outright peril. If the Democrats can retain a filibuster hold on the Senate, the worst can probably be avoided. But remember that many conservative Democrats favor significant cuts in Social Security benefits; and as for Medicare, even some moderate Democrats favor a private voucher system. If Obama loses, such a system for Medicare becomes a serious possibility. Will vouchers truly get costs down by boosting competition, or will they do it by less salutary means? Keep in mind that the subsidies would be too meager to allow full health-care benefits—and their growth, if Republican Congressman Paul Ryan has his way[4], would be too severely constrained to keep up with rapidly escalating health-care costs. Such stringency all but guarantees that lower and middle-income people will get less health care than wealthier Americans, by an ever-widening margin. It is reform by triage. As for Medicaid, the program for the poor, it could be decimated.

4) The future of Obamacare. The Affordable Care Act is far from perfect; but given the powerful interests lined up against better possibilities—such as Medicare for all—it is about the best we are going to get. A Republican president and Congress would likely eliminate it in favor of a tax-subsidized choice of private plans—once again, a sure path to inadequate health care for growing numbers of Americans. Supposedly, the private markets would take care of all of us efficiently. The fact that Medicare payments have grown significantly more slowly than private insurance casts serious doubt on that.

5) Financial regulation. Mitt Romney has made it clear that he wants to reverse the Dodd-Frank regulations. Wall Street lobbyists have already whittled away at the original Dodd-Frank proposals; as of this writing, fewer than two-thirds of the new rules have been encoded and enforced—even as Jamie Dimon, head of JPMorgan Chase and the most astringent of the antiregulation bankers[5], has had to admit that his banks lost more than $4 billion through precisely the kind of risky trades that serious regulation would have prevented. Vigorous regulation is the way to limit financial excesses and check the complex of leverage, manipulation, and profit incentives that triggered the financial disaster. A Romney administration would do its best to sweep away all such limits.

6) Foreign policy. I am no expert, but any citizen paying attention to the Republican primaries has heard Mitt Romney talk like a trigger-happy Cold War president of the 1960s. Global political hot spots—whether Israel-Palestine, India-Pakistan, North Korea–South Korea, the African continent, or China—require cool thinking and some empathy with other people’s needs. Romney has demonstrated neither. I’ve been skeptical of Obama’s reinforcement of the Afghan war, his demands for military tribunals, his use of drones to target the Taliban, and his acceptance of warrantless wiretapping and “email-tapping.” But consider the likely Romney approach.[6] Fighting a war with Iran, for example? Sending troops to Syria? And does anyone doubt that domestic surveillance and the infringement of privacy under Romney would be much, much worse?

In sum, it seems clear to me that an Obama defeat will speed our nation’s decline and endanger social instability, pushing us toward a more fractious America. I know that some readers favor the Romney principles of significantly smaller government, reduced taxes for the wealthy, and increased privatization of social programs. Yet the likely Romney focus on deficit control will risk another recession while precluding needed public investment in infrastructure, green technologies, and education. America’s future depends on such public investment much more than on controlling the deficit immediately. An Obama victory is the nation’s best defense against retreat from its future responsibilities, from caring for the poor and protecting middle-class opportunities, from the country’s growing commitment to minority rights and its global responsibility to set values of fairness and good sense—not just more troops and targeted drones—as a model for the world.

Since last fall, Obama has talked a better game than he did in the first years of his presidency. He has proposed a decent jobs program and is now talking in clearer and more forceful ways about the true purposes of government. A second term could be a more enlightened one, and he may yet become one of America’s finest presidents. This will be a historically critical election.

*An earlier version of this story misidentified Erskine Bowles as Chester Bowles.